\n<\/p>\n
Ford is delaying about $12 billion in planned investments on EVs, including construction of a second battery plant with joint venture partner SK On <\/span>due to softening demand for higher priced premium electric vehicles.\u00a0<\/span><\/p>\n CFO John Lawler emphasized Thursday during the company\u2019s third-quarter earnings call that the company wasn\u2019t backing away from its next-generation EV vehicles. However, he along with CEO Jim Farley acknowledged that while EV sales have grown, consumers aren\u2019t willing to pay a premium for an EV over a gas or hybrid vehicle. That price pressure has squeezed profits, and in the case of Ford\u2019s EV business caused losses to grow.<\/p>\n While, overall, Ford is still wildly profitable, those earnings are coming from its commercial product and services business known as Ford Pro and sales of its iconic gas and hybrid vehicles, which falls under its Ford Blue unit.\u00a0<\/span><\/p>\n The company\u2019s Model e unit \u2014 the business dedicated to EVs \u2014 is another story.\u00a0<\/span>Ford reported a $1.3 billion loss in the third quarter on its Model e unit up from the $1.08 billion lost in the previous quarter<\/a>. Ford ultimately hopes to reach an 8% margin on EVs with a cost structure that reflects price parity with ICE vehicles. To get there, Ford will need to make structural changes.<\/span><\/p>\n Farley said reducing the sticker price on electric vehicles is a top priority in order to keep up with the \u201cmoving target\u201d that is the EV market. For Ford, that means cutting operational costs and scaling quickly in an attempt to land on the sweet spot that Tesla has nailed.<\/span><\/p>\n \u201cTesla actually gave us a huge gift with the laser focus on cost and scaling the Model Y,\u201d Farley said Thursday during the company\u2019s third-quarter earnings call. \u201cThey set the standard and we are now making real progress on our second and third cycle EVs that are in the midst of being developed today.\u201d<\/span><\/p>\n That \u201creal progress\u201d hasn\u2019t translated into a profitable EV business yet.<\/p>\n Ford\u2019s answer, which Farley emphasized on the company\u2019s earnings call, was on price, not more features.\u00a0<\/span>Ford appears to be already putting this cost strategy into action. In October,\u00a0Ford introduced the <\/span>F-150 Lightning Flash pickup<\/span><\/a>, a cheaper, tech-heavy version of the F-150 Lightning. Ford also said it\u2019s planning to introduce a few second and third-generation vehicles, including a new full-sized pickup truck, that will come in at lower price points.\u00a0<\/span><\/p>\n \u201cGreat product is not enough in the EV business anymore,\u201d said Farley. \u201cWe have to be totally competitive on cost.\u201d<\/span><\/p>\n Lawler said the automaker\u2019s next-gen EVs will drive the \u201cultimate success of our EV transition\u201d because they\u2019ll be cost-optimized and \u201cguided by the learnings of our first-generation vehicles that are currently in the market.\u201d<\/span><\/p>\n In the meantime, Ford is shifting production and adjusting future capacity to \u201cbetter match market demand.\u201d The automaker has taken out some Mustang Mach e production and has slowed down several investments, including working with Korean battery maker SK On to delay a second <\/span>Blue Oval SK<\/span><\/a> joint venture battery plant in Kentucky. Ford has also said it will evaluate its global Battery Park Michigan plant for potential adjustments.\u00a0<\/span><\/p>\n \u201cAll told, we have pushed about $12 billion of EV spend, which includes capex, direct investment and expense,\u201d said Lawler, noting that Ford won\u2019t \u201cactually go ahead and pull the trigger on it if we don\u2019t need to.\u201d<\/span><\/p>\n Ford and United Auto Workers union negotiators reached a <\/span>tentative agreement <\/span><\/a>Wednesday to end what has become a six-week strike. Ford said the strike had an EBIT impact of about $100 million in the third quarter and has trimmed about 80,000 units from the automaker\u2019s plan.\u00a0<\/span><\/p>\n \u201cThis would reduce 2023 EBIT by roughly $1.3 billion,\u201d said Lawler, noting that Ford will provide updates on its full-year guidance once the agreement is ratified.<\/span><\/p>\nFord pulls guidance pending UAW deal<\/h2>\n